$80B raise driven by surging AI demand

Berkshire to buy $5B each of Class A and C shares

Analysts call short-term dip a buying opportunity

The Google logo. [AP]
The Google logo. [AP]

Google parent Alphabet has launched an $80 billion share offering to fund AI infrastructure investment, with Berkshire Hathaway agreeing to take up $10 billion of the raise — a move that has amplified expectations about Alphabet's growth prospects.

Alphabet said it plans to raise roughly $70 billion through a public offering and an additional $10 billion through a private placement directed at Berkshire Hathaway, according to Reuters and other international media reports Wednesday.

Of the $70 billion public portion, $30 billion will be fully underwritten by lead banks and then resold to investors. The remaining $40 billion will be raised through an at-the-market offering, under which shares are sold periodically through underwriters.

Berkshire Hathaway plans to purchase $5 billion each of Alphabet Class A and Class C shares. The commitment ranks among the largest equity investments Berkshire has made in recent years. Berkshire held roughly $400 billion in cash as of late March, and the move has prompted analysts to suggest the company is actively seeking new investment targets by deploying large sums into technology stocks.

Berkshire began building its Alphabet stake last year and held approximately $16.6 billion worth of shares as of late March. It first bought roughly 17.8 million shares in the third quarter of last year and has increased its position for two consecutive quarters since.

Alphabet said the offering is intended to fund investment in world-class AI infrastructure to meet unprecedented customer demand.

"Demand from enterprises and consumers for AI solutions and services exceeds the company's current supply capacity," Alphabet said in a statement. "Through this investment, we aim to expand the foundational infrastructure needed to support significant growth opportunities."

Kwon Young-bae, a researcher at Mirae Asset Securities, said the offering signals that capital expenditure guidance for next year could be revised sharply higher compared with this year, reflecting the strength of AI demand.

At its earnings call in April, Google raised its full-year capital expenditure outlook to between $180 billion and $190 billion, up from a prior range of $175 billion to $185 billion.

The strength of AI demand was also evident in first-quarter earnings. Alphabet's cloud segment posted sales of $20.02 billion in the first quarter, a 63 percent jump from a year earlier. Monthly paid active users of its generative AI service Gemini Enterprise rose 40 percent quarter-on-quarter. Wall Street has noted that Google's monetization of AI services is accelerating.

Alphabet's share price fell after the offering was announced. Class A shares closed down 1.04 percent at $3,776.37 in regular trading that day, and slipped a further 1.95 percent in after-hours trading.

Alphabet Class A shares fell 2.42 percent from May 2 through Monday, a weak showing compared with the Nasdaq Composite, which gained 10.12 percent over the same period.

Analysts at home and abroad are highlighting Google's ability to monetize AI and offering positive outlooks. "Given the full-scale expansion of AI and rapid earnings growth, any short-term share price decline from the offering is a good buying opportunity," Kwon said.

JPMorgan set a price target of $400 in April, saying "solid margin expansion continues even amid a large investment cycle."


moon@heraldcorp.com